Perspectives on where our world is heading from a vantage point in Denver, Colorado.

05 October 2011

Social Security Retirement Benefits Distributionally Close To Neutral

Via the Baseline Scenario blog.

Almost all of the progressive component of Social Security taxation and spending on a net basis comes from its diability benefits program. While the payroll tax is regressive, the benefits one receive closely align with the taxes paid in one's lifetime (they are ever so slightly progressive), so the retirement benefits from Social Security do very little to redistribute income one way or the other (and Social Security, unlike Medicare, is actually very fiscally sound on a long term basis and not contributing meaningfully to the deficit thank you very much). It is also almost surely the case that Social Security reduces government spending on a wide range of other government benefits and charitable giving burdens that would otherwise exist. And, almost no government program is as efficient in collecting taxes at a low administrative cost or distributing funds at a low administrative cost, in both cases with very low levels of fraud and abuse for a government social safety net program. Basically, Social Security's retirement program is little more than a form of forced savings.